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on Payment Systems and Financial Technology |
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Issue of 2022‒01‒31
24 papers chosen by |
| By: | Colin Brown; Jonathan Chiu; Thorsten Koeppl |
| Abstract: | Can Bitcoin remain tamper proof in the long run? We use block-level data from the Bitcoin blockchain to estimate the impact of congestion and the USD price on fee rates. The introduction and adoption of the Segwit protocol allows us to identify an aggregate demand curve for bitcoin transactions. We find that Segwit has reduced fee revenue by about 70%. Fee revenue could be maximized at a block size of about 0.6 MB when Segwit adoption remains at current levels. At this block size, maximum fee revenue would be equivalent to 1/8 of the current average block reward. Hence, large sustained price increases are required to keep mining rewards constant in the long run. |
| Keywords: | Digital currencies and fintech; Payment clearing and settlement systems |
| JEL: | E42 G2 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:bca:bocawp:22-2&r= |
| By: | Van Roosebeke, Bert; Defina, Ryan |
| Abstract: | A growing number of central banks are considering the issuance of central bank digital currencies (CBDCs). Upon their introduction and depending on their exact design, CBDCs may have considerable consequences for deposit insurers as well. In the first of a set of papers, this Fintech Brief sets out four of the main motivations for issuing CBDCs. Acknowledging considerable divergences across jurisdictions, we find: • CBDCs for the general public (“retail CBDCs”) would constitute a central bank liability and a form of digital cash. To the public, they would be an alternative to central bank issued cash and private money, such as bank deposits. • A large and growing share of central banks are experimenting with retail CBDCs. Some 20% of central banks indicate that they are likely to issue a retail CBDC by 2026, 40% indicate this is “possible”. • Short-term monetary policy considerations are unlikely to play a significant role in central banks’ motivation for CBDCs. • Whereas central banks in emerging markets and developing economies note that CBDCs may contribute to promoting financial inclusion, in advanced economies, CBDCs are not the most straightforward instrument in doing so. • The evolution of payments plays a pivotal role in developing CBDCs. Given the declining role of cash in some jurisdictions, CBDCs as a new form of central bank money may contribute to safeguarding trust in the public currency. However, the available CBDC amounts necessary for that purpose may cause conflicts with likely and financial-stability-related limits on the volume of CBDCs that individuals may hold. • As CBDCs would offer an alternative payment solution, they would contribute to resilience in future payment markets that may be privately dominated. However, given their digital nature, CBDCs may well be subject to similar cybersecurity and other digital risks that apply to private payment systems. • CBDCs may contribute to competition and efficiency in an otherwise oligopolistic market for payment services, dominated by BigTechs. While potentially challenging to implement, a regulatory or competition-law-based response may be possible and would be less intrusive than introducing a CBDC. • Central banks face the risk of large-scale use by the public of private or public (i.e. CBDC) digital currencies, not denominated in the domestic currency. These currencies may play a decisive role in the economy, and if foreign-based, largely out of reach of domestic legislation. CBDCs and/or private payment solutions in the domestic currency may assist in mitigating this risk, given sufficient demand for these. |
| Keywords: | deposit insurance; fintech; CBDC |
| JEL: | G21 G33 |
| Date: | 2021–11–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111006&r= |
| By: | Benedict Guttman-Kenney; Christopher Firth; John Gathergood |
| Abstract: | We show consumers taking out buy now, pay later (BNPL) - an interest-free FinTech product enabling consumers to defer payments into instalments - commonly charge instalments to their credit card (a higher interest rate product). We find $19.5\%$ of credit cardholders in our UK transactions data charged at least one BNPL instalment to their credit card in 2021: a practice $24\%$ more prevalent in the most deprived geographies and among younger consumers. Our analysis provides an example of how consumer financial protection regulators can use real-time transactions data to monitor markets and evaluate potential risks - especially (largely) unregulated, financial innovations such as BNPL. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.01758&r= |
| By: | Ozili, Peterson K |
| Abstract: | This paper highlights the globally-important determinants of financial inclusion. The determinants identified in this paper are formal account ownership; demand for formal savings; demand for formal borrowings; financial literacy and education; debit and credit cards usage; the need to receive remittances from family and friends; size of the financial system; number of automated teller machines (ATMs); number of bank branch; closeness to a bank; availability and access to mobile phones; availability of digital financial products and services; technology infrastructure; government policy; culture and traditional belief systems; national financial inclusion strategy and implementation; and direct legislation. |
| Keywords: | financial inclusion; determinants; unbanked adults; access to finance; digital finance; financial literacy |
| JEL: | G20 G21 I31 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111342&r= |
| By: | Mestiri, Sami |
| Abstract: | Bitcoin has received a lot of attention from both investors and analysts, as it forms the highest market capitalization in the cryptocurrency market. The use of parametric GARCH models to characterise the volatility of Bitcoin returns is widely observed in the empirical literature. In this paper, we consider an alternative approach involving non-parametric method to model and forecast Bitcoin return volatility. We show that the out-of-sample volatility forecast of the non-parametric GARCH model yields superior performance relative to an extensive class of parametric GARCH models. The improvement in forecasting accuracy of Bitcoin return volatility based on the non-parametric GARCH model suggests that this method offers an attractive and viable alternative to the commonly used parametric GARCH models. |
| Keywords: | Bitcoin; volatility; GARCH; Nonparametric; Forecasting. |
| JEL: | C14 C53 C58 |
| Date: | 2021–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111116&r= |
| By: | Sunny Yangguang Huang (Assistant Professor, Department of Economics and IEMS Faculty Associate; The Hong Kong University of Science and Technology) |
| Abstract: | From 2007 to 2020, China's Peer-to-peer lending market experienced a drastic boom and bust, and ended up with zero surviving platforms. The key reason for the collapse of China's P2P sector was that almost all P2P platforms deviate from the role of information intermediary and became shadow banks offering principal guarantee. As the number of P2P platforms increases, each platform has a greater incentive to offer principal guarantee in responses to fierce competition and the lure of financial fraud under limited regulatory capacity. This hurts the investors' and social welfare. The existence of naive investors makes offering principal guarantee more attractive to platforms. Promoting information disclosure may not solve the problem. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:hku:briefs:202261&r= |
| By: | Chen, Jingjing (University of Warwick) |
| Abstract: | Empowerment for girls and women, Goal 5 for the Sustainable Development Goals, is the key for economic development. As mobile phones become cheaper and more prevalent, a growing number of researchers are investigating their impact on women's empowerment. Most previous research has relied on interviews and cross-sectional data, so their conclusion limited to the association rather than establishing the causal relationship between mobile phones and female empowerment. This paper used Indian Human Development Survey 2005 and 2011-2012 to study the association between mobile phone ownership and women's empowerment in rural India. Then difference in- difference strategy was applied to identify the causal impact of village mobile phone service installation on female empowerment. Like previous studies, the results from this paper suggest that mobile phone ownership was associated with higher women's empowerment. Moreover, mobile phone service installation increased women's involvement in decision-making process but it decreased female labour force participation and contraceptive usage in rural India. |
| Keywords: | gender equality ; empower women ; mobile phones ; decision making power ; freedom of movement JEL Classification: J12 ; J13 ; J16 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:wrkesp:09&r= |
| By: | Defina, Ryan; Van Roosebeke, Bert; Manga, Paul |
| Abstract: | E-money is widespread in Kenya, especially through MPESA, a form of e-money stored on mobile phones and issued by Safaricom, a mobile network operator (MNO). Integration between the MPESA platform and the traditional banking system is increasing. Given the very high use-grade of MPESA throughout the population, it has reached critical importance in Kenya. In Kenya, e-money issuers must back their e-value with bank balances at commercial banks (float), through trust accounts. Deposit insurance does not cover a default of the e-money issuer. However, the Kenya Deposit Insurance Corporation aims at offering pass-through coverage in case of a default of the deposit-taking commercial bank holding the trust accounts. Pass-through coverage is confronted with a number of challenges, including regarding data on the identity of e-money users and their balances held. Also, the critical importance of MPESA raises questions as to how to deal with a potential default of the MNO and the role of deposit insurance in such a scenario. Looking forward, there is merit in further coordination amongst safety net participants as well as in the management of trust accounts and the strengthening of data-availability requirements to e-money issuers. |
| Keywords: | deposit insurance; bank resolution |
| JEL: | G21 G33 |
| Date: | 2021–12–09 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111007&r= |
| By: | Gabriel Borrageiro; Nick Firoozye; Paolo Barucca |
| Abstract: | We demonstrate an application of online transfer learning as a digital assets trading agent. This agent makes use of a powerful feature space representation in the form of an echo state network, the output of which is made available to a direct, recurrent reinforcement learning agent. The agent learns to trade the XBTUSD (Bitcoin versus US dollars) perpetual swap derivatives contract on BitMEX. It learns to trade intraday on five minutely sampled data, avoids excessive over-trading, captures a funding profit and is also able to predict the direction of the market. Overall, our crypto agent realises a total return of 350%, net of transaction costs, over roughly five years, 71% of which is down to funding profit. The annualised information ratio that it achieves is 1.46. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.04699&r= |
| By: | Cong, Lin William; Yang, Xiaohan; Zhang, Xiaobo |
| Abstract: | Using administrative universal firm registration data as well as primary offline and online surveys of small businesses in China, we examine (i) whether digitization helps Small and Medium Enterprises (SMEs) better cope with the COVID-19 pandemic, and (ii) whether the pandemic has spurred digital technology adoption. We document significant economic benefits of digitization in increasing SMEs’ resilience against such a large shock, as seen through mitigated demand decline, sustainable cash flow, ability to quickly reopen, and positive outlook for growth. Post the January 2020 lockdown, firm entries exhibited a V-shaped pattern, with entries of e-commerce firms experiencing a less pronounced initial drop and a quicker rebound. Moreover, the pandemic has accelerated digital transformation of existing firms and the aggregate industry in multiple dimensions (e.g., altering operation scope to include e-commerce, allowing remote work, and adopting electronic information systems). The effect persists one year after full reopening, offering suggestive evidence for the long-term impact of the pandemic and transitory mitigation policies. |
| Keywords: | Health Economics and Policy |
| Date: | 2021–11–01 |
| URL: | http://d.repec.org/n?u=RePEc:ags:cuaepw:317045&r= |
| By: | Miglo, Anton |
| Abstract: | This article analyzes crowdfunding campaigns of technology firms in England. We compare the predictions of crowdfunding theories with empirical evidence. We are particularly focused on factors of campaign success related to indirect signalling (such as the choice of campaign target) by founders that have mixed evidence in existing research as opposed to direct signalling (eg. the number of updates by founders). We have found that the campaign target has U-shape effect on success of campaign. For example, the probability of success increases if the threshold value is neither very small or significantly large. This is consistent with the spirit of some theoretical research on crowdfunding. We also provide an overview of literature related to informational problems in crowdfunding, highlight gaps and controversial areas and provide some suggestions for future research. |
| Keywords: | crowdfunding, reward-based crowdfunding, crowdfunding in technology sector, digital entrepreneurship, information asymmetry, signalling, factors of crowdfunding success, campaign target |
| JEL: | G32 M21 O33 |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111349&r= |
| By: | Märkel, Christian; Stronzik, Marcus; Simons, Martin; Wissner, Matthias; Lundborg, Martin |
| Abstract: | Die Blockchain-Technologie bietet neue Möglichkeiten zur dezentralen und sicheren Transaktion und Speicherung von Daten, von denen große Potenziale auf die gesamte Volkswirtschaft ausgehen. Um diese Potenziale zu realisieren, ist es essenziell, dass die Diffusion der Blockchain-Technologie in die Breite der Wirtschaft und damit auch in den Mittelstand gelingt. Die vorliegende Studie widmet sich dem Blockchain-Einsatz im Mittelstand. Ziel ist es, die Chancen und Hemmnisse des Blockchain-Einsatzes im Mittelstand zu identifizieren, sowie die Auswirkungen verschiedener Blockchain-Ausgestaltungsformen auf die Wettbewerbsposition der kleinen und mittleren Unternehmen zu untersuchen. Eine im Rahmen der vorliegenden Studie durchgeführte Expertenumfrage zeigt, dass eine gesteigerte Effizienz, sowie verbessertes Supply Chain Management und eine erhöhte Datensicherheit als die größten Chancen des Blockchain-Einsatzes im Mittelstand gesehen werden. Als größte Hemmnisse im Mittelstand identifizieren die befragten Experten hingegen die fehlende Sensibilisierung für die Technologie sowie fehlende Fachkräfte und die noch begrenzte Marktreife von Blockchain-Lösungen. Für die Analyse der Auswirkungen des Blockchain-Einsatzes auf die Wettbewerbsposition des Mittelstands wird zwischen den Ausgestaltungsformen öffentliche Blockchain, private Blockchain und Blockchain-as-a-Service unterschieden. Es zeigt sich, dass von der öffentlichen Blockchain die größten Potenziale für die Stärkung der Wettbewerbsposition des Mittelstands ausgehen. Durch die begrenzte Skalierbarkeit öffentlicher Blockchain-Lösungen und der daraus resultierenden schwankenden Transaktionskosten unterbleibt bisher jedoch häufig der Einsatz der öffentlichen Blockchain in realwirtschaftlichen Anwendungsfällen, sondern fokussiert sich gegenwärtig auf finanzwirtschaftliche Anwendungen. Für den Mittelstand sind hier insbesondere neuartige Finanzierungsformen wie bspw. Security Token Offerings (STO) von Relevanz. Bei realwirtschaftlichen Anwendungsfällen für den Blockchain-Einsatz kommt hingegen gegenwärtig überwiegend die private Blockchain zum Einsatz, da sich hier das Problem der Skalierung nicht stellt. Allerdings ist bei privaten Blockchains der Dezentralitätsgedanke nicht stark ausgeprägt, so dass hier für den Mittelstand insbesondere im B2B-Kontext neue Abhängigkeiten in Form von Lock-in Effekten entstehen, bzw. bestehende Abhängigkeiten verfestigt werden können. Ein Lösungsansatz kann hierin liegen, durch den Mittelstand frühzeitig konsortiale Blockchain-Strukturen auf Branchenebene, bspw. über den Branchenverband, anzustoßen, um so eine Machtkonzentration in privaten Blockchains zu vermeiden. |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wikdps:477&r= |
| By: | Huke, Jonathan; Siegfried, Patrick |
| Abstract: | Agility and digital trends go hand in hand, but the advantages of digitalization perform a high pressure on the established automotive companies. For years now, automotive groups have no longer been innovation drivers in the industry. This status is reserved for radical companies like Tesla. But is there any chance that conservative companies will reinvent themselves, establish leaner structures and thus regain market dominance and innovation? |
| Keywords: | Automotive Sector, Business Agility, Digital Disruption, Lean Management, Mobility as a Service, Scaled Agile Framework, Value Streams, Zero-based-budgeting |
| JEL: | M00 |
| Date: | 2021–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:111087&r= |
| By: | Bruce Mizrach |
| Abstract: | Seven of the ten largest stablecoins are backed by fiat assets. The 2016 and 2017 vintages of stablecoins have failure rates of 100% and 50% respectively. More than one-third of stablecoins have failed. Tether has a 39% share of 1.77 trillion USD in 2021Q2 transactions, and USD Coin 28%. The top three stablecoins have an average velocity of 28.3. Tether transacted between 3.8 million unique addresses, 63% of the ERC-20 token network. Six of the top ten tokens have unconcentrated Herfindahl indices, but Gemini, Pax and Huobi have single holders with more than 50% of the supply. The median Tether transaction fee is similar to the cost of an ATM transaction, but they are three to four times more for Dai and USDC. Fees, which are proportional to the price of Ethereum, are rising though. Median fees for Tether rose 3,628% over the last year, and 1,897% for USD Coin. 24 hour exchange turnover in Tether is nearly $120 billion. This is comparable to the daily volume at the NYSE and almost 15 times the daily flow in money market mutual funds. Narrow bid-ask spreads and depth have attracted active HFT participation. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.01392&r= |
| By: | Eric Darmon |
| Abstract: | We investigate how introducing a bidding agent impacts the process and outcome of an online reverse auction in the context of a crowdlending platform. We consider this issue in the context of a peer-to-business platform that connects individual lenders to small and medium-sized enterprises. Using a before/after study design, we perform an econometric analysis and find that introducing a bidding agent had a positive and dramatic impact on the number of bids and bidders and reduced the time necessary to collect the funds. For projects with lower ratings, it also positively impacted the number of lenders and indirectly enhanced portfolio diversification. We find that after the bidding agent was introduced, well-rated projects benefited from lower interest rates, the magnitude of the change depending positively on their rating. These results provide evidence that the bidding agent generates savings in the screening and bidding costs incurred by lenders and benefits both sides of the platform. Our contribution documents the role of bidding agent as a strategic tool to enhance financial intermediation. It also sheds light on how two types of decision support systems (rating-based and bidding agent) interact and shows that this interaction is of crucial importance with respect to the financial regulation of platforms if the crowd has low financial literacy. |
| Keywords: | decision support system; crowdlending; bidding agent; online reverse auction. |
| JEL: | D44 D83 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:drm:wpaper:2022-2&r= |
| By: | Maria Mercanti-Guérin (IAE Paris - Sorbonne Business School) |
| Abstract: | Digital twins are a digital representation of the physical world. Among the multiple applications of digital twins, housing is one of the first sectors concerned. The objective of this re-search is to determine whether interior designs conceived by digital twins are more readable by artificial intelligence than human-designed designs (1) and whether these designs generate more consumer preference (2). Our first experiment shows that AI generates fewer annotation or classification errors when analyzing designs conceived via digital twins. Our second experiment shows that consumers' attitudes are more favorable towards designs conceived by digital twins. Aesthetics and complexity, which are two dimensions of object creativity, are perceived negatively. Only the "novelty" dimension which can be assimilated to modernity ex-plains a strong preference for this type of interior. A discussion on AI as a possible brake on creativity and reinforcement of the status quo bias is proposed. |
| Keywords: | status quo,creativity,AI,digital twins |
| Date: | 2021–11–25 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03450262&r= |
| By: | Ge-zhi Wu; Da-ming You |
| Abstract: | This paper empirically examines the impact of enterprise digital transformation on the level of enterprise diversification. It is found that the digital transformation of enterprises has significantly improved the level of enterprise diversification, and the conclusion has passed a series of robustness tests and endogenous tests. We find that the promotion effect of enterprise digital transformation on diversification is mainly realized by reducing enterprise organization costs; The impact of digital transformation on enterprise diversification is heterogeneous, We find that it plays a more significant role in higher organization costs situation, lower transaction costs situation and service industry. |
| Date: | 2021–12 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.06605&r= |
| By: | Jovanka Lili Matic; Natalie Packham; Wolfgang Karl H\"ardle |
| Abstract: | The cryptocurrency (CC) market is volatile, non-stationary and non-continuous. This poses unique challenges for pricing and hedging CC options. We study the hedge behaviour and effectiveness for a wide range of models. First, we calibrate market data to SVI-implied volatility surfaces to price options. To cover a wide range of market dynamics, we generate price paths using two types of Monte Carlo simulations. In the first approach, price paths follow an SVCJ model (stochastic volatility with correlated jumps). The second approach simulates paths from a GARCH-filtered kernel density estimation. In these two markets, options are hedged with models from the class of affine jump diffusions and infinite activity L\'evy processes. Including a wide range of market models allows to understand the trade-off in the hedge performance between complete, but overly parsimonious models, and more complex, but incomplete models. Dynamic Delta, Delta-Gamma, Delta-Vega and minimum variance hedge strategies are applied. The calibration results reveal a strong indication for stochastic volatility, low jump intensity and evidence of infinite activity. With the exception of short-dated options, a consistently good performance is achieved with Delta-Vega hedging in stochastic volatility models. Judging on the calibration and hedging results, the study provides evidence that stochastic volatility is the driving force in CC markets. |
| Date: | 2021–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.06807&r= |
| By: | Erik Brynjolfsson |
| Abstract: | In 1950, Alan Turing proposed an imitation game as the ultimate test of whether a machine was intelligent: could a machine imitate a human so well that its answers to questions indistinguishable from a human. Ever since, creating intelligence that matches human intelligence has implicitly or explicitly been the goal of thousands of researchers, engineers, and entrepreneurs. The benefits of human-like artificial intelligence (HLAI) include soaring productivity, increased leisure, and perhaps most profoundly, a better understanding of our own minds. But not all types of AI are human-like. In fact, many of the most powerful systems are very different from humans. So an excessive focus on developing and deploying HLAI can lead us into a trap. As machines become better substitutes for human labor, workers lose economic and political bargaining power and become increasingly dependent on those who control the technology. In contrast, when AI is focused on augmenting humans rather than mimicking them, then humans retain the power to insist on a share of the value created. Furthermore, augmentation creates new capabilities and new products and services, ultimately generating far more value than merely human-like AI. While both types of AI can be enormously beneficial, there are currently excess incentives for automation rather than augmentation among technologists, business executives, and policymakers. |
| Date: | 2022–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2201.04200&r= |
| By: | Mayukh Mukhopadhyay; Kaushik Ghosh |
| Abstract: | Non Fungible Token (NFT) Industry has been witnessing multi-million dollar trade in recent times. With rapid innovation of the NFT market environment by technology, innovation, and decentralization, it is becoming hard to distinguish between genuine NFT from fads and scams. This article discuss the NFT market microstructure, with a focus on price formation, market structure, transparency, and applications to other financial areas. Market manipulation in NFT market with the context of wash-sale patterns has also been surveyed. The article concludes by providing pointers on due-diligence activity that can be adopted by investors to mitigate NFT trading risk. |
| Date: | 2021–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2112.03172&r= |
| By: | Kristoffer Mousten Hansen (GRANEM - Groupe de Recherche Angevin en Economie et Management - UA - Université d'Angers - AGROCAMPUS OUEST - Institut Agro - Institut national d'enseignement supérieur pour l'agriculture, l'alimentation et l'environnement - Institut National de l'Horticulture et du Paysage) |
| Date: | 2021–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-03480292&r= |
| By: | Jonathan Oladeji; Joseph Yacim; Benita Zulch |
| Abstract: | Purpose: There is a need for the modification of mortgage finance to embrace new innovative finance options that will facilitate access to housing by low- and middle-income earners in Africa. Thus, this paper seeks to evaluate the suitability of informal finance options for incremental housing development in Africa.Design / methods followed/ approach: A desktop survey of the literature was carried out to consider mortgage financing in contrast to other housing financing options. The approach was used to critically appraise and consolidate existing studies on innovative financing (informal finance option) in Africa. The Mendeley app was used to collate and organize the literature chronologically spanning 24 years of 1994-2018. Thematic content analysis was used to appraise positions, gaps, and lapses in the implementation of different informal housing financing solutions.Findings: In most African countries like Kenya, Rwanda, Nigeria, and Malawi, mortgage finance research continues to grow as a major part of affordable housing finance. However, there are considerable interests in innovative affordable housing finance tools and incremental housing for the low-income groups.Research limitations / implications: This study is limited by the low volume of quantitative literature and data gaps about incremental housing in the African context. However, this motivates the need for a more elaborate exploration of the research and knowledge available.Practical implications: This study adds to the growing discussion of exploring available research on innovative housing finance in Africa.Originality / Value of work: To our knowledge, this study provides insight into the opportunities for a diverse pool of formal and informal financing options to build an acceptable house finance framework for the African housing market. |
| Keywords: | Affordability; Africa; developing; economies; Finance; Framework; housing; Incremental; loans; Mortgage |
| JEL: | R3 |
| Date: | 2021–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:afr:wpaper:2021-028&r= |
| By: | Gegenfurtner, Dennis Andreas |
| Abstract: | International Original Sin is still a persistent and widespread phenomenon, especially in emerging market and developing (EMD) countries. The difficulties that may arise from the inability of countries to borrow internationally in their domestic currency, among other effects, can hamper EMD countries' efforts to achieve domestic economic stability. The phenomenon of Original Sin and some of its potential causes were examined by Eichengreen et al. (2002) and later Hausmann and Panizza (2003). According to their findings, merely the economic size of a country is significant in explaining the variation of Original Sin. This article, first, investigates empirically whether the rather orthodox explanations of Original Sin as examined by Eichengreen et al. (2002) and Hausmann and Panizza (2003) remain invalid, even when investigating a greater timeframe with different trends and, second, elaborates an alternative explanatory approach following Fritz et al. (2018) and de Paula et al. (2017, 2020). The empirical analysis confirms that rather orthodox theories have difficulties in explaining the increased exposure of EMD countries to Original Sin. However, the concept of a currency hierarchy sheds light on the phenomenon. Differences in the liquidity premium between northern and southern currencies and the liquidity preference of investors explain the constraints of southern countries to borrow internationally in their own currency. To climb up the hierarchy of currencies by increasing their liquidity premium is a lengthy and arduous undertaking. One way to achieve this could be by uniting with economic partners, especially in its ultimate form as a currency union. |
| Keywords: | Original Sin,emerging market and developing countries,empirical analysis |
| JEL: | C31 C32 F3 F4 F6 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ipewps:1742021&r= |
| By: | Amin, S.; Murshed, S.M. |
| Abstract: | This paper investigates the relationship between ethnic and religious diversity and financial development by using the data for 102 developing countries. It is widely accepted that financial depth, and the more ready availability of finance, has a central role to play in fostering economic growth. We hypothesize that financial development in developing countries, especially those at the early stages of economic development, may be retarded by pre-existing ethnic and religious diversity, which may produce conflict. However, we believe that this risk can be moderated by sound institutional functioning – including good governance and democracy. Financial depth is measured by M2 and private credit (as a percentage of GDP); the Alesina fragmentation index is used for measuring ethnic and religious diversity, varieties of democracy (VDEM) and the quality of governance datasets. Our results are supportive of our hypothesis that ethnic and religious diversity can indeed hamper financial development; these risks, however, are mitigated by well-functioning institutional arrangements |
| Keywords: | Ethnic diversity, religious diversity, financial development |
| JEL: | Z10 Z13 G0 |
| Date: | 2022–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:ems:euriss:137094&r= |